Data Driven Revolution (II)

It’s time to continue with our last post. We were how technolgies enabled the personalization of products and services.

The democratization of transaction and information costs has transformed the way of doing business, especially in the first decade of the XXI century. Today, organizations compete at a worldwide level in a fast changing environment, with lower entry barriers and symmetric information between sellers and buyers. On the one hand, this means that new sources of competitive advantage persist less over time. On the other hand, it also means that customers can compare for free and buy every product worldwide, thanks to the affordability of transportation costs. Thus, classic companies’ advantages like tangible assets or well-structured value chains are giving way to new sources of value.

It is here where the power of collaboration, big data and data analytics comes into play. In a fast changing environment, data that can be transformed in knowledge is becoming a very valuable asset. Also, new analytical tools are democratizing the analysis of big amounts of data. A few years ago, these processes were only available to large corporations.

Data driven organizations, like Google or Facebook are today among the most powerful companies in the world. In only a couple of years, they have transformed the way people and companies behave. These organizations are enabling complete new markets that didn’t exist before, and they are threatening the hegemony of leaders in classic sectors like Banking, Energy or Insurance. Why? Because all of these industries have one thing in common: profitability is directly related with the information quality of their activities, clients and other stakeholders.

This statement it is not only true for the three sectors above mentioned, but in a greater or lesser extent to all the organizations. We live in the era of data. We have produced more data in the last few years that in the entire history of human being. And we have an affordable way to analyze massive amounts of data and transform it into valuable knowledge. All this things combined represent challenging opportunities, but also big threats. Threats for classic banks, which start to consider Facebook and Google as potential competitors with better customer knowledge than them. Threats for classic energy companies, that are watching Google closing a multibillion dollar deal with Nest. A company that can predict the energy demand better than them. And many more examples are available on the web.

Mark Van Rijmenam preconizes in his book Think Bigger, that companies who fail in managing big data in the medium term, will cease to exist in 10 to 15 years from now. I do not know if the data impact will be as big as he says, but it cannot be denied that it is going to deeply change how the companies will operate and how they will create brand new competitive advantages in the future. New advantages based in the ability to turn internal and external sources of data, in valuable knowledge for decision making. But in essence, new advantages to continue doing the same: create or evolve new strategic, managerial or organizational models that outperform their competitors. Data driven organizations that will enable the development of more efficient processes and the creation of more personalized value propositions to each customer.

Francisco Parra, Research Analyst @ Delfos Research.

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